India: CCI To Probe ABB India For Unfair Business Ways

Last Updated: 15 July 2016
Article by Rupin Chopra and Lucy Rana

Most Read Contributor in India, September 2018

Recently, the Competition Commission of India (hereinafter referred as 'Commission'), in the case of InPhase Power Technologies Private Limited V. ABB India Ltd. ruled in favor of the informant, ordering the Director General to conduct an investigation on the matter and submit its report within 60 days from the date of receipt of the order.

Brief Background

The Informant deals in designing, developing and manufacturing of Power Quality and Power Conversion products indigenously in India; and supplies them to various industries.

The Opposite Party is a public listed company and a subsidiary of Switzerland based ABB Group, engaged in the business of manufacturing of electrical equipment like switch gears, drives, automation, etc. It also manufactures dynamic reactive power compensators and harmonic filters which are Power Quality and Power Conversion products.

The Informant has developed a Static Synchronous Compensator (STATCOM) named as IPC-150 SCOM, which is claimed to be more advanced than the product of the Opposite Party in terms of technology and features. The Informant has applied for a patent of this product and the patent application bearing no. 4055/CHE/2015 dated August 5, 2015 in that regard is pending.

The Opposite Party has developed two static synchronous compensators (hereinafter referred as STATCOMs) namely STATCON and PQC STATCON. The Opposite Party have applied for a patent over PQC STATCON and the application in that regard is currently pending before the patent authorities.

The Informant filed a complaint to Competition Commission of India, stating that the Opposite Party is abusing its dominant position, in the relevant market, to restrain the sale of Informant's product.

Contentions of the Informant

  • Positive response of the consumers towards the product of the Informant prompted the Opposite Party to find ways to suppress the technological innovation/development and competition posed by the product of the Informant.
  • The Opposite Party abused its dominant position by instituting civil and criminal litigation with mala fide intention to stop the informant from doing business. The Opposite Party has filed the patent infringement case against the Informant and has obtained an ex- party ad interim injunction order, dated July 25, 2015. The said order is passed by the Court of the City Civil and Sessions Judge, Bengaluru. The said order has put the Informant on the verge of bankruptcy as it is not able to do business in the relevant product. Vide another order dated February 20, 2016, the City Civil and Sessions Judge, Bengaluru has made the ad interim injunction absolute.
  • The relevant market in the present matter is 'manufacture and sale of Power Quality Compensators with IGBT technology for low voltage i.e. below 1000V in India'. As per the Research Report of Ken Research (2015) titled "India: Reactive Power Compensation Market Outlook to 2020", the Opposite Party is dominant in the relevant market with 32% market share which is almost double the next player i.e. Alstom which commands 18% market share.

    Due to wide product portfolio of the Opposite Party, the consumers are totally dependent on it for procuring several products other than power quality products. The Opposite Party have taken undue advantage of this dependency of the consumers, by forcing them to purchase its power quality products i.e. PQC STATCON and not to deal with the Informant.
  • The Opposite Party has distributed some letters and other written materials apart from making personal calls to the customers and suppliers stating that the Informant is an illegal and sham company against which legal proceedings are being initiated. To support this contention, Informant has made the submissions on February 17, 2016 and March 17, 2016 giving copies of declarations made by a consumer and a distributor of the Opposite Party.
  • The Informant has cited the previous Judgement of the Commission in Case no. 105 of 20131 and pointed that abusing judicial process to restrict competition could be a subject matter of Section 4 of the Competition Act, 2002 (hereinafter referred as Act). The Informant also argued that the case relating to the patent infringement, which is pending before the City Civil and Sessions Judge, does not concern anti-competitive practices and abuse of dominance by the Opposite Party.
  • The Informant pointed out 23 differences between the products of the Opposite Party and the Informant, and submitted that there is neither any patent violation nor any theft of information by the Informant. Hence, the litigations instituted by the Opposite Party are frivolous and with mala fide intention to restrict competition by ousting the Informant from the business.
  • KPMG Report, submitted by the Opposite Party, cannot be relied upon as the original hard disc of the computer used by Mr. Panna Lal Biswas was damaged and the report is based on the examination of the imaged hard disc.

Contentions of the Opposite Party

  • The Commission does not have jurisdiction in the present matter in view of the pendency of the patent infringement suit before the Court of the City Civil and Sessions Judge, Bengaluru.
  • The Informant has misled the Commission by conflating two different relevant markets i.e. low voltage and high voltage, to present a distorted view of Opposite Party's market position. The delineation of the relevant market to only IGBT technology is incorrect as IGBT is one type of interchangeable technology on the basis of which power capacitors operate.
  • As per the figures from Indian Electrical and Electronics Manufacturer's Association (IEEMA), in terms of Mega Volts Amps Reactive (Hereinafter referred as MVAR) total 'low voltage power capacitor' manufactured in 2015 was 28708 MVAR, out of which the Opposite Party manufactured only 900 MVARs. Accordingly, its market share is only 3.13% in the market of low voltage power capacitors. In context of the wider relevant market i.e. power capacitors of both high and low voltage power capacitors, 48292 MVARs were manufactured during 2015, out of which, the Opposite Party manufactured roughly 9400 MVARs which translates to 19.4% market share. Hence, the Opposite Party is not the dominant player in the relevant market as it faces competition from four other major manufacturers.
  • The letter, submitted by the Informant, is a precautionary step taken by the Opposite Party, as they heavily invested in the creation and protection of its valid intellectual property and such letter is not in any manner indicative of its participation in any anti-competitive or abusive conduct.
  • Three ex-employees of the Opposite Party have stolen confidential information relating to innovation and development of their product and the same information and technology has been used by the Informant for developing IPC 150 SCOM. To support his contention, Opposite Party has referred the forensic audit report of the hard disc and computer data of Mr. Panna Lal Biswas, prepared by KPMG.

Observations of the Commission

  • It is observed that the Commission is the appropriate forum to consider matters concerning anti-competitive agreements and abuse of dominant position; and mere pendency of a patent infringement suit before a civil court does not exclude the jurisdiction of the Commission in the said matters if the Informant is able to make out a prima facie case for contravention of Section 3 or Section 4 of the Act.
  • The relevant product market has to be defined keeping in view the competition that prevails among substitutable products available in the market.

    The Commission agrees with the Informant and delineates the relevant product market in the present case as, the market for "Manufacture and Sale of Power Quality Compensators with IGBT technology for low voltage i.e. below 1000V".
  • The figures submitted by the Opposite Party are related to production of capacitors, which is not the relevant product in the instant case. Although exact data pertaining to the relevant market has not been filed by either parties as they are not readily available in the public domain. Thus, based on the information available on record, prima facie, the Opposite Party is found to be dominant in the relevant market.
  • The steps taken by the Opposite Party, during the pendency of the patent applications and patent infringement litigations, to dissuade its suppliers and customers from dealing with the Informant appear to be anti-competitive in nature.
  • The Opposite Party attempted to set a mechanism whereby it gets intimation if any of its competitor approaches its customers.
  • The Opposite Party through its abusive conduct has attempted to limit supply and scientific development in the market and denied market access to the Informant.

Held

Under the provisions of Section 26(1) of the Act, the Commission directed the DG to cause an investigation into the matter and to complete the investigation within a period of 60 days from date of receipt of this order. During the Course of investigation, if involvement of any other party is found, the DG shall investigate the conduct of such other parties who may have indulged in the said contravention.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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